Struggling Sri Lanka waits on China to unlock its US$2.9 billion IMF bailout

A self-imposed December deadline to secure the bailout has almost passed as Colombo awaits Beijing’s financing assurances to satisfy the IMF board

Meanwhile, more than one-third of the island nation’s families face food insecurity as inflation races, industry craters and the economy shrinks

Reading Time:3 minutes

Drivers push their auto rickshaws to a petrol station in Colombo earlier this year as the crisis severely restricted Sri Lanka’s ability to import fuel. Photo: AP

Published: 5:30pm, 23 Dec 2022

Bankrupt Sri Lanka’s 22 million people, already battling rampant food inflation and severe fuel and medicine shortages, are set for yet more misery as progress falters on a US$2.9 billion International Monetary Fund bailout.

Colombo reached an agreement with the IMF in September, subject to conditions such as tax reforms and changes to the way electricity is priced, to inject life back into an economy suffering its worst-ever crisis since independence and reeling from this year’s historic default.

But the package is still awaiting IMF board approval as Sri Lanka needs financing assurances from its three biggest bilateral creditors. China holds the largest slice of the island country’s external government debt, with 19.6 per cent of US$37.6 billion as of the end of last year, followed by Japan with 9 per cent and India with 2 per cent.

A self-imposed December deadline for receiving approval from the IMF on releasing the bailout funds has now been pushed back to next year, according to the governor of Sri Lanka’s central bank.

Protesters demonstrate against new tax policies and budget proposals in Colombo earlier this month. Sri Lanka’s economic crisis and severe shortages have spurred months-long protests. Photo: EPA-EFE

Meanwhile, the economy shrank by an eye-watering 11.8 per cent in the third quarter, official figures showed – its worst contraction ever bar the 16.4 per cent recorded at the height of the pandemic in the second quarter of 2020. The industrial sector, meanwhile, shrank 21.2 per cent.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x

Struggling Sri Lanka waits on China to unlock its US$2.9 billion IMF bailout

A self-imposed December deadline to secure the bailout has almost passed as Colombo awaits Beijing’s financing assurances to satisfy the IMF board Meanwhile, more than one-third of the island nation’s families face food insecurity as inflation races, industry craters and the economy shrinks

A self-imposed December deadline to secure the bailout has almost passed as Colombo awaits Beijing’s financing assurances to satisfy the IMF board

Meanwhile, more than one-third of the island nation’s families face food insecurity as inflation races, industry craters and the economy shrinks